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Iran disinvestment law is working, Poizner says

December 14, 2010 | 3:36
pm

Four international oil-related companies have stopped doing business in Iran, providing evidence that a California effort to economically pressure the Islamic republic is having an effect, outgoing state Insurance Commissioner Steve Poizner said Tuesday.

Earlier this year, Poizner published a list of foreign companies operating in the defense, nuclear, energy and finance areas of Iran. At the same time, he told California-licensed insurance companies that they could not receive credit on financial statements for holdings in any of the 50 companies on the list.

The four new companies to come off Poizner's list were Royal Dutch Shell of the Netherlands, Shell International Finance of the Netherlands, Total of France and Repsol YPF of Spain.

"The decisions of these companies to end operations in Iran offer the clearest indication yet that our Iran Initiative has played an important role in reducing the level of investment in Iran," Poizner said. "By leveraging the financial power of the insurance industry, our Iran investment efforts have established a strong incentive for companies to stop doing business in Iran."

Poizner noted that insurance companies have cut back sharply their investments in companies operating in sensitive sectors of the Iranian economy. In 2009, such new investments totalled nearly $1 billion. The equivalent figure for the first half of this year was only $164 million, he said.

Iran has been listed as a state sponsor of terrorism by the U.S. State Department. It is currently being subjected to a number of international economic sanctions designed to discourage Iran's rulers from developing nuclear weapons.

California insurance companies have taken no formal position on the morality of the message Poizner is trying to send with his anti-Iran sanctions. But they dispute the way the commissioner has put his policy into place.

The Department of Insurance, they argue, illegally crafted a so-called underground regulation. The commissioner issued his rules without following state requirements to hold public hearings and submit proposed regulations for approval by the state's Office of Administration Law.

"Our dispute is about process," said Rex Frazier, president of the Personal Insurance Federation, a Sacramento trade group.

The Office of Administrative Law agrees with the insurance companies that Poizner illegally bypassed state rules for vetting new regulations. Poizner in turn sued the fellow state agency.